[BN] the know

Senate passes deal to avoid ‘fiscal cliff’

Sen. John Barrasso, left, R-Wyo., talks with Sen. Brian Schatz, D-Hawaii, who holds up his watch, near the Senate chambers after a vote on the fiscal cliff, on Capitol Hill Tuesday, Jan. 1, 2013 in Washington. The Senate passed legislation early New Year's Day to neutralize a fiscal cliff combination of across-the-board tax increases and spending cuts that kicked in at midnight. (AP Photo/Alex Brandon)

WASHINGTON – Senators rang in the new year today with a onesided early-morning vote for last-minute legislation that avoids most of the tax hikes in the “fiscal cliff,” while putting off a series of draconian spending cuts for two months.

The 89-8 vote won quick praise from President Obama.

“While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay,” President Obama said in a statement. “This agreement will also grow the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more.”

But the Senate vote also set the stage for a debate and vote later today in the House, where the vote may not be so lopsided.

“Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members – and the American people — have been able to review the legislation,” House Speaker John Boehner and the rest of the Republican House leadership said a statement.

The Senate vote came at about 2 a.m. after a day of tempered optimism and frayed tempers at both ends of Pennsylvania Avenue.

The lawmakers voted after Senate Democrats met for 90 minutes with Vice President Joe Biden, who negotiated the final deal with Senate Minority Leader Mitch McConnell, R-Ky.

The deal won widespread support from liberals and conservatives alike – including New York’s two Democratic senators and Republican tea party stalwarts such as Sen. Ron Johnson of Wisconsin and Pat Toomey of Pennsylvania.

Sen. Tom Harkin, D-Iowa, and Sen. Marco Rubio, R-Fla., were among the most prominent lawmakers to oppose the measure.

Word of the final deal leaked hours after President Barack Obama and Senate Republican Leader Mitch McConnell announced they were nearing agreement.

“There are still issues left to resolve, but we’re hopeful that Congress can get it done,” Obama said at a White House event in the mid-afternoon. “But it’s not done.”

Minutes later, McConnell, of Kentucky, took to the Senate floor to urge his colleagues to support the coming compromise.

“We will continue to work on finding smarter ways to cut spending, but let’s not let that hold up protecting Americans from the tax hike,” McConnell said. “We can do this. We must do this.”

Hours slipped by without an announcement of a final agreement, prompting the House to abandon its plans to meet late into the evening.

“Attn. Capitol Hill reporters: It is impossible for the House to schedule a vote on a deal that does not exist,” Doug Heye, spokesman for House Majority Leader Eric Cantor, tweeted in the middle of the afternoon. “Thank you.”

Finally at about 9 p.m., congressional aides said that Biden and McConnell had finalized a deal that would:

– Keep tax rates steady for most Americans, while increasing the rate on individual income of more than $400,000 and household income of more than $450,000. For those higher earners, tax rates would increase from the current 35 percent to 39.6 percent – the level it was at during the Clinton administration.

– Permanently raise the tax rate on dividends and capital gains to 20 percent, up from 15 percent, for upper-income earners in the new top tax bracket.

– Preserve the child tax credit and a tax credit for college tuition.

– Fix the alternative minimum tax so that 30 million Americans would not have to pay it.

– Increase the estate tax for individual estates of more than $5 million and family estates of more than $10 million from the current 35 percent to 40 percent.

– Allow the 2 percent, two-year cut in the payroll tax to lapse, restoring the rate to 6.2 percent.

– Extend unemployment benefits for two million unemployed Americans.

– Preserve current Medicare payments for doctors.

– Delay the automatic budget cuts, which were set to take effect today, for two months – thereby setting up a second late-February fiscal cliff where those budget cuts will have to be dealt with along with another extension of the federal debt ceiling.

– Extend current federal dairy policy in order to avoid a doubling of milk prices in the new year.

If approved by the House, which meets at noon today, the bill would avert a tax increase for more than 90 percent of Americans.

The deal came despite a great deal of renewed partisan acrimony, much of it stemming from the president’s appearance at a podium in front of middle-class families that supposedly would be affected if the nation were to fall off the fiscal cliff.

Obama signaled at the event that he may push for additional higher taxes on the wealthy, beyond those in the current deal, rather than accept a future budget deal based on budget cuts alone.

“If (Republicans) think that’s going to be the formula for how we solve this thing, then they’ve got another thing coming,” Obama said. “That’s not how it’s going to work. We’ve got to do this in a balanced and responsible way.”

Hearing that, several Republicans took to the floor of the Senate to express their anger.

“If the desire was to offend me, the speech did, but if the desire was to deter me, it did not,” said Sen. Johnny Isakson, R-Ga.

In the coming talks over the debt ceiling, “the president’s not going to make a deal by poking us in the eye,” Isakson added.

The dust-up over the president’s comments came as the outcome of the current fight over the fiscal cliff remains anything but certain.

Harkin said he, for one, was dismayed at the deal that was taking shape.

Complaining that taxes should increase on households earning more than $250,000, Harkin took to the floor of the Senate to say: “No deal is better than a bad deal.”

Sen. Rand Paul, R-Ky., agreed, but for different reasons.

“The Republican Party should have no fingerprints on this and in no way support anything that raises taxes, because it’s bad economic policy,” Paul said on the Senate floor

Meanwhile in the House, Rep. Mike Rogers, R-Mich., told reporters that if the deal were to put off the automatic spending cuts, it would have to include other provisions aimed at taming federal spending.

“When it comes here we’ll figure out what we can pass,” Rogers said. “If we don’t have real spending cuts, I don’t think it could pass the House of Representatives.”

Congressional aides said, though, that the Senate’s delay actually might win additional votes for the passage of the compromise in the House.

That’s because nearly all House Republicans have signed a pledge not to raise taxes – a pledge they would have to violate by voting for the compromise in 2012.

But with the tax hikes technically taking effect at midnight, the same vote on Tuesday will actually be a vote for a tax cut, which makes it much more politically palatable for conservative Republicans.

Another potential area of concern, though, was the fact that the deal pulling the nation from the precipice of the fiscal cliff will push the nation back to the edge of trouble in only two months.

The deal only delays budget cuts adding up to $1.2 trillion over 10 years, including $109 billion in 2013, that are evenly split between defense and domestic programs – meaning they are so draconian that Republicans and Democrats alike loath them.

Coming up with a plan to replace them with other cuts – most likely to entitlement programs such as Medicare and Social Security, among other programs – will be controversial, especially when paired with an increase in the federal debt ceiling.

But lawmakers such as Rep. Brian Higgins, D-Buffalo, were inclined to go along with the deal nevertheless.

“It moves of off the fiscal cliff, and that is good,” Higgins said. “But it only deals with half the problem.”